The Chancellor’s Budget announcements have spelled some good news for farming.
Presenting his plans to Parliament on Wednesday (24 March), Alastair Darling outlined policies to double investment allowances, cut business rates, stagger fuel duty increases and leave Capital Gains Tax at the current level of 18%.
At the same time, Inheritance Tax thresholds will be frozen for the next four years, but a new 5% Stamp Duty rate will be introduced for residential properties sold for over £1m.
“Doubling the annual investment allowance from £50,000 to £100,000 is good news,” NFU head of economics Tom Hind commented on our special live coverage of the Budget on FWi .
“It’s not the same as the Agricultural Buildings Allowance, but will be a benefit to farmers looking to invest profits back into their businesses.”
The expected blow of a 3p/litre increase in fuel duty was softened by Mr Darling, staggering the increase in 1p/litre increments – in April, October and next January.
“The staging of the increase in fuel duty will help in terms of haulage costs within the food chain, but is short of the deferral that business was looking for,” said Mr Hind.
The announcement that CGT will remain at the current level was greeted with some caution.
“Freezing CGT was a bit of a surprise and clearly just a vote-winner,” said Catherine Vickery of accountant Old Mill. “I can’t see it staying there – businesses need to plan to make any sales or transfers of property before the next budget, possibly considering moves to trigger early exposure to CGT.”
The introduction of a 5% Stamp Duty bracket for residential properties sold for over £1m is unlikely to have a significant impact on agricultural holdings.
“Stamp Duty is only at the increased rate of 5% on residential property – commercial and mixed property will remain the same at 4% over £500,000,” explained Mrs Vickery.
“However care will need to be taken where a property and land are being purchased separately, as I would anticipate these sorts of transactions will now be looked at more closely.”
The lack of change in other areas of fiscal policy was also viewed with some scepticism by the FWi panellists.
“While the Chancellor’s ‘no further change’ comment on income tax, VAT and National Insurance are very much as expected, it would be prudent to consider how things might change longer term, particularly once the election is over,” said Clydesdale Bank’s David Douglas.
“These are the only areas of taxation which are capable of generating anywhere near the extra £30bn the Chancellor will need in the future.”
For a more detailed commentary on what the Budget will mean for farming read the full transcript of our coverage.